HIBT Lab! Landed: Alex Lofton

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2:33Discover more at Stripe.com. Welcome to How I Built This Lab. I'm Guy Raz. So there are lots of people who want to buy a home and who can afford to pay the mortgage. The problem is the down payment. In most cases, you need to have 20 % of the purchase price in cash before a bank will lend you the money for the mortgage. Well, this is a huge problem for millions of people, especially people who can't go to mom or dad or who don't have intergenerational wealth. And in many of those cases, that means people who are not white or people who have solid middle class jobs like nurses or teachers or emergency workers and firefighters.

3:16many of them can't afford to buy homes in the cities where they work. So Alex Loftin, my guest today, is trying to help fix that. In 2015, Alex and two friends launched Landed. It's a company that helps people who do essential work buy homes by helping them with the down payment. In exchange for providing the cash for the down payment, Landed gets an equity stake in the home. And when it eventually sells or the owner refinances the mortgage, Landed's investors get a share of the appreciation. Today, Landed has helped over a thousand essential workers buy a home in more than 30 states across the country.

3:56And long before starting this company, Alex watched firsthand as his parents, two public sector workers in Bellevue, Washington, struggle to pay the bills. I would say like 80 % of the reason my parents would fight would be over money. It would be about the month to month just making the next bill. How is that going to happen? What were we not going to do? And I didn't really quite understand because I would go, if we went to a toy store, I would just tell my mom, I want this toy. She said, we couldn't afford it. And I would just say, well, just pull out your checkbook. Just write a check. That's where it comes from.

4:33And I had no idea, no concept that a check had to be related to something in a bank account. That was out of this world to me. So I think as I got older, I appreciated how relative the entire world, how lucky we were, and how actually not poor we were. But when you're around a bunch of babies of Microsoft. Multi-millionaires. Yeah. Did you guys, did your parents own a home? They did not own a home until I was 12, 11 or 12. My grandmother, granny, my mom's mom, she was not only my best friend at the time, but she was the first time in our family where someone owned something they could pass along.

5:09So when she died, she passed her home along to my parents. So it's a first example of intergenerational wealth being transferred to someone. And that was a game changer. So you went on to Northwestern for college and you ended up working for Obama's first campaign, which must have been a pretty amazing experience at the time. Oh, man. It was awesome. My first job out of college is working for this guy who, first of all, my parents thought I was crazy. I was graduating from a very expensive school, and I had to take out debt. And I was choosing to go work for this campaign where I was going to get paid$800 a month.

5:50My parents were like, why are you working for this guy? No one can pronounce his name. Hillary Clinton is obviously going to win. Yeah, because you started working for him early, like before he was the frontrunner in 2007. Oh, yeah. I jumped on the campaign first as a volunteer. I showed up with my tie on and I brought in a briefcase and they said, you know, what's your background? What do you hope to do here? I said, I would like a paid job, preferably in policy. And, you know, I prefer a five day a week situation. And they said, well, you can take off that tie, never wear that again. Sit in the corner making phone calls for our field department all hours of night if you want to do that.

6:26And, you know, didn't sound too glamorous. I said, heck, why not? I jumped on as a volunteer, but I came for what this guy Barack Obama was saying and the vision for the future that I agreed, you know, really resonated with me. And I ended up staying because of the people that were showing up. You had organizers from labor movements. You had management consultants. You had top lawyers. You had technologists. You had all these people from all corners of society coming together and saying, I think I have something to contribute here to try to do a campaign differently. So I think you did a variety of stints working for Obama for America over a few years.

7:07And presumably, I mean, I have to imagine that that early experience, you know, that was that first campaign. There was a lot of energy idealism. It was a lot of people who were committed to social justice work when many of them eventually started social enterprises. Do you think that's where your energy for what you do now in part came from? For sure. I would never trade in that opportunity that I had to work on the Obama campaign for anything. It really did ground me both in understanding the power of having clear set of values that you operate from as an organization, and making sure that that's known and felt across entire operation.

7:50In that case, in the Obama campaign, it was all about respect and power include. No matter what, there's a way in which you can honor what people, what their talents and their resources, what they are and what they can bring to the table. And you could find a way to line those up to achieve a greater outcome if you just empower them right. I also learned personally what I'm passionate about, what I'm good at. And what I'm good at is enrolling people. My dad always said if I had been announced more religious, I definitely would have been a pastor. but given that that wasn't my my path that you know getting people excited telling a story having people see themselves in that story and getting them motivated to be a part of it was what my job was yeah but I I didn't you know this is in hindsight at the time I was just doing it because I thought man this is this is the next thing that needs to happen and I also never thought a guy that looked like me would ever have a chance of running for president tell me when you say guy who looks like me, what do you mean?

8:46Well, I'm a half black guy who grew up with a mom who's white, a dad who's black, but to the outside world, I'm a black man in America. And I genuinely thought that maybe by the time I'm dead, we'd see a president when I'm older be a black guy, but not in 2007, 2008. And honestly, that was where all the skepticism was coming from. For example, from my own father, a black man who said, this is nuts, it's never going to happen. And so, you know, part of my motivation to be a part of that campaign was, well, you know, I don't know if we're going to win this. I can't predict this, but I know it's worth working on and trying.

9:26There's a viable path here. It's going to be a lot of work. So it's that kind of one part delusion and one part grounded reality that I think I learned there that ultimately was successful in the campaign that kind of drew me to bring that to other ventures. All right. You end up going to do an MBA at Stanford. And one of the beauties of going to business school is that you can often meet other super motivated people who want to start a business. And that's what you did. You met some friends there who you ended up co-founding, landed with. Before we get to landed, what was the problem that you landed on, so to speak?

10:06What was the problem that you discovered or thought about that you wanted to try and figure out how you could solve? I remember sitting in this is I think I'm the only person in the world that was inspired in an intro to finance class and in this class there we talked a lot about the concept of diversification and the power of diversifying where your money is so that if one investment goes up another one can go down and you still could be in a good place and that it was key to how rich people stayed rich. And I just remember sitting there being struck by the fact that no one in my social circles thinks that way.

10:46Like people don't have enough stuff, enough money, enough capital to even think about diversifying. Most people are just thinking about how the heck am I going to save enough to ever get a down payment on a home? That's really about the pinnacle of investing is having your own home. And I thought, man, it would be really, first of all, crazy that I'm an overeducated person and just now thinking about this. Why haven't I been forced to really learn this earlier on? And number two is, what if we could bring the tools of high finance and tools of the wealthy to more people? Democratize who has access to build wealth in the first place.

11:24And just to clarify for a second, I mean, when you're hearing this idea about wealth diversification, you start thinking, how can we democratize access to tools that enable people to, you know, to build wealth? You're not thinking like, oh, let's do a, you know, an easy trading platform or an easy like index fund or something. You're thinking property. That's where my head went because that's what I knew really well. And honestly, I'm a millennial, a millennial who lived in San Francisco Bay Area. I was like, how the heck am I going to be able to afford to buy a home at some point. You know, it was a selfish motivation to just like I need a tool that moves me from being a renter to being an owner, the zero or one, you know, kind of dilemma, what's the gradient in between?

12:07I will say, though, that's where, you know, partnering up meeting other people who have come from a different background was super important, something I also believe in. And you got if you're going to build something great, you got to diversify your team. And my co founder, Jonathan, came at it from a slightly different angle, but But it awakened me to another thing that was going on in our economy, in our society, which is given how expensive land is and becoming, this is one area that had yet to really leverage technology to disaggregate or disintermediate investing in something like real estate.

12:41that there were a lot of people who would want to invest in real estate, but just can't because of the cost of entry is too big. So what if you made it easier to access investment in one of the biggest asset classes in the world and do so in a more cooperative way with the people who want to live in it? So it wasn't just, hey, we're going to buy a property and rent it back out to people that actually you can have occupants be a part owner in it. And then that would be a really interesting proposition to big time investors because they're trying to figure out another way. You had Blackstone and others after the 2008 financial crisis buy up a bunch of properties that used to be for ownership and now are only rental.

13:19And that wasn't a world that either Jonathan and I were super excited about. Yeah. All right. You guys are at Stanford and this is 2015 and you come up with this concept for landed, which we'll really get into in a moment. But essentially at that time, and it's even more so today, for the average person in America to buy a piece of property, a house in the Bay Area was out of reach. I mean, I think today you need a million dollars at least. And that's almost still impossible to find a home for a million dollars in, you know, Metro San Francisco area and San Jose area. It's crazy. Which means that you can't have a normal functioning city when a huge number of people can't afford to live there because you need a city with nurses and construction workers and, you know, and firefighters and cops and people who are earning good salaries.

14:13uh plumbers electricians i mean cities can't function without these people and they can't afford to buy houses in markets like seattle or or the bay area or new york or you know la or etc yeah that's right i mean good salaries a lot of these folks um have pensions right they actually have they they have some mechanism where they're starting to build wealth but they're not paid enough to put money into retirement, pay the cost of living for wherever they live and save for a down payment. And these are people who can't just pick up their laptop and go work remotely. You got to be present for them.

14:52The story that really struck me is that there is a teacher in the South Bay of the Bay Area who would drive two and a half hours each way to get to work. Sometimes would decide just to sleep in their car because they didn't want to drive back. There's the emotional part of me that says, oh, that just feels wrong, right? I don't want that to exist. But honestly, the math side of me, this equation doesn't add up. If this keeps happening, no one's going to be able to or work in these positions. And if they don't work in these positions, who's there to teach your kids and who wants to live in a place where there aren't teachers, right?

15:26And so I think about this as an infrastructure challenge. How do you make sure that you have the people that you need to build the cities and the societies that you want Yeah. And support them, you know, uphold them because they're upholding all of us every single day. They're doing all this stuff that we all depend on every single day. Why aren't we actually upholding them? And there seems to be a way in which we just think more creatively about the financial tools that are actually available, but making them more widely available to people, leveraging technology to do so. There is a huge opportunity here.

15:57We're going to take a short break, but when we come back, more from Alex about the struggles Americans face in becoming homeowners And how his company landed is working to change that Stay with us, I'm Guy Raz, and you're listening to How I Built This Lab

16:18This past summer, I took my family to Athens, and it was unforgettable We wandered through plakas, winding streets, hiked up to the Hill of the Muses at sunset, and spent hours exploring the National Archaeological Museum, standing inches away from artifacts that have shaped the world. But one of the things that made the trip truly special was the place we booked on Airbnb. It was tucked just off a quiet street in Kukaki with a terrace that looked out over the Acropolis. Every morning, we'd sit outside with Greek coffee and fresh bugazza from the bakery downstairs, watching the city wake up. If you ever get a chance to go, I cannot recommend it enough.

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20:49Welcome back to How I Built This Lab. I'm Guy Raz. My guest today is Alex Loftin, co-founder and president of Landed. So the problem is, is that there are all of these so-called essential employees, people who have essential jobs, who have a stable, steady income. Some of them earn a pension, but in many cases, they don't have the cash to put down on a home. So you come up with a concept to figure out a way to help finance that, to give them some of the money for a down payment. Let's talk first about how you decided which jobs would be eligible for help from Lended. That decision on who our customer was at the end of the day came after we figured out this tool, to be honest.

21:33Because for all the reasons that you just listed, it was who most acutely is going to feel this problem of not having the upfront wealth needed to buy a home and who don't have the only other option that's available out there, which is the bank of mom and dad, going and borrowing money or getting money from a family member to get started. If you don't have that, who is having this problem? Well, it's the person who could otherwise afford a mortgage, right? Because our product helps people who have enough money to afford rent on a monthly basis, but can't do that and afford the down payment. I mean, if you can afford to pay$800 to$1 ,500 a month in rent, in most of America, you can afford to pay a mortgage.

22:17Right. But if you don't have the, whatever,$100 to$200 ,000 up front to get the mortgage in the first place, you're SOL. So the core concept here is who has kind of the jobs that are paying relative enough to afford a mortgage, but may not have a front cost. What are the jobs that are relatively counter cyclical, right? So if the economy goes down, these jobs still exist. Well, they tend to be these infrastructure jobs in education and health care and government. So, you know, the lesson here for us was make sure the product that you have is actually solving a real problem for people. And these are the people who are feeling this problem the most.

22:59And you could partner with their employer, somebody who they trust to communicate, to market that this product exists. And that's ended up how what we did. We ended up partnering with school districts and hospitals and governments to kind of get the word out about our product so that their staff wouldn't just feel like, hey, what's this sketchy thing I found on the Internet that's offering down payment program? But actually, this is something that's trying to address a challenge that they know I have. So nurses, teachers, first responders, the idea is to help them get the cash to buy. Now, before we go on how this works and how you turn it into a business, you came from, you know, a lot of your experience had been in the nonprofit world, right?

23:44And so I wonder, did the three of you talk about making this a nonprofit at the outset? Yeah, one of the earliest conversations was what's the corporate structure going to look like? What's going to be the best? And our approach, our thinking was, okay, we know there's a challenge here for a lot of people with this down payment piece. And we know that to create a different world, we're going to have to eventually move just more money than God to make this happen. because each person, if you're talking about offering up to$150 ,000 per buyer, that's a lot of money when you start multiplying how many people would use support like this.

24:23So we're going to have to mobilize a lot of money. It's going to take a lot of infrastructure to get us there. And frankly, there's an unknown timeline here, how long it's going to take to make that happen, with an unknown amount of money that it's going to take, with a lot of risk. And it was clear to us at the time that venture seemed to be the right fit. Yeah. And so and, you know, there's other pieces that are worth mentioning. We were going to have to compete for talent and we're going to need a lot of engineers. Yeah. Engineers, if their option is to go get equity from one company over us, we're going to have to compete with that.

24:57You needed engineers to build an interface for potential users? An interface for the consumer, but also just a lot of data management of what properties are being purchased, what their value is, and what that means for the investors that we were partnering with. So there was just a lot of components there. And so to be able to compete, we wanted to be able to offer real ownership in something. All right. So you had to raise money and then you'd have a pool of money that you could then use to give to people to help them buy their home. Well, we would be helping people access a traditional mortgage.

25:37That was our goal. Once you get to a traditional mortgage, which basically means you need to have 20 % down. Right. Yeah. That was the golden number we're trying to get people to. So our job was to get people to that 20%. They would then have to go to a bank or a mortgage lender to get the other 80%. But you were focused on a down payment, the 20%. And that was what the pool of money you needed to raise would go towards. Well, that was one of the pools of money we have to raise. One thing that I never thought I would become was a fundraising machine. But we had to raise money. That was what's called a prop co, the property company.

26:13We had to raise money that was available to the individual buyer to invest in their home to help them with a down payment. That was kind of one stream. The other stream was we need money to run our company. And that was the operating business, the op co. And that's where we raise money from venture. So it has always been a dual fundraising challenge. And on top of that, okay, that's the fundraising piece. Then we had to actually do the work of building the infrastructure, right? You know, we're building off of shoulders of others. There have been institutions since the seventies that have been leveraging shared appreciation or shared equity to help people into homes.